November 2008

MAC Economic Commentary

Realities surrounding nuclear energy

By
P. Stothart

Few energy sources attract the controversy that is associated with nuclear energy and the fuel it requires – uranium. The spectre of potential radioactive accidents and leakages has long been presented by environmental groups as a cause for opposition, as has the technical and social challenge of long-term waste management. A number of governments over the years, ranging from nations such as Germany to provinces such as British Columbia and Nova Scotia, have introduced policies specifically prohibiting uranium mining and/or nuclear reactor development.

Available evidence suggests that these opponents are generally engaging in exercises of political hypocrisy. No energy source is without environmental and social consequence. Fossil fuel combustion has links to smog, acid rain and attendant health concerns. Wind energy requires large land masses, creates noise pollution and poses a hazard to birds — all to generate minor amounts of unreliable power. Hydro-power requires large-scale flooding, ecosystem destruction and resultant mercury releases. Even supposedly clean ethanol is proving to be disruptive to world food prices while presenting a marginal (or by some studies, negative) benefit regarding greenhouse gas (GHG) emissions relative to gasoline. On the health and safety front, in terms of worker and population impacts, few if any major energy sources measure up to the record of nuclear energy.

It is on the climate change front that the anti-nuclear hypocrisy becomes most evident. The International Energy Agency forecasts significant growth in energy demand over the coming decades. Most of this energy will continue to come from traditional fossil fuel sources, albeit with improved technology for cleaner combustion and possibly carbon capture and sequestration. Wind and solar energy will continue to make inroads but are unlikely to play more than a boutique role in filling the demand gap. In light of this reality, most countries will miss their Kyoto targets in 2010 by considerable margins — Canada by over 30 per cent.

A further reality is that the largest under-developed economies, China and India, generate most of their power from coal combustion, with high associated GHG emissions. Electricity demand in China is such that 500 new coal-fired plants are currently being built — generally using old-fashioned technology and environmental controls. As the only major proven energy source that emits no greenhouse gases, logic suggests that the nuclear option should be at the top of the list of worldwide energy supply choices.

It should be noted that not all environmental groups or governments have continued to live with blinkers on in response to these realities. The environmental community has seen splits emerge as some groups move towards a supportive position vis-à-vis nuclear energy. Among governments, Germany and Western Australia have softened previous anti-nuclear policies. Indicative is a January 2007 report by Deutsche Bank warning that Germany would miss its carbon dioxide emission targets by a wide margin, face higher electricity prices, suffer more blackouts and dramatically increase its dependence on gas imports from Russia as a result of an intended nuclear phase-out policy were it to be followed through.

Realities such as these are combining to create significant momentum behind nuclear energy in many regions of the world. Some 439 reactors are currently in operation worldwide, while 36 new reactors are under construction, 93 are planned and 218 have been proposed. Republican presidential candidate John McCain is calling for 45 new reactors in the United States to lessen dependence on foreign oil. China envisions an increase from 8.5 GW of nuclear capacity at present to around 50 GW by 2020, while Russia projects adding two to three gigawatts of nuclear power annually to 2030.

In response to this growth, uranium prices have increased dramatically in recent years — from $8 per pound in 2000 to $65 at the time of writing. Haywood Securities projects prices levelling at around $95 for the coming years. This comes as positive news for Canada, as the world’s largest supplier of uranium. Measured by jobs, exports and tax revenues, the federal and Saskatchewan governments will continue to benefit from this reality for years to come.

Paul Stothart is vice-president, economic affairs, at the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.